How Do You Create a Budget With Irregular Income?

Depending on your occupation, your income may change from month to month. For example, freelance writers have irregular income. With more people turning to the gig economy, many of them don’t have a predictable paycheck. This becomes a major challenge when it comes to budgeting. This is because the exercise involves ensuring one’s spending and savings don’t exceed the income.

When your income changes from time to time, budgeting is not easy. However, you can still create a budget even if you have inconsistent income. It may even be more important for people to limit their spending and set goals for savings if one cannot expect a certain amount of money coming in every month. This means you may need to adopt a different budgeting approach. Here are some budgeting tips for with irregular income:

Calculate the Baseline Income

If you are budgeting with variable income, you need to determine the amount of money you should live on every month. Come up with a list of essential expenses, everything you need at all times, no matter what. What are the essential needs?

Some of the essential expenses include food, health, housing, and debt repayments. The needs will vary from one person to another. Some of the things you should consider when creating a list include: 

  1. Values 
  2. Goals 
  3. Priorities

They will help to evaluate what matters the most in your life. Next, think about the monthly cost of the essential expenses, this will be the “baseline” of how much money you need even if the income fluctuates. Ensure you specify all essential expenses in your budget. By doing so, it will always be clear what you need to pay for every month.

Determine the “optional” Expenses

When it comes to budgeting with variable income, you should also consider adding expenses that reflect the average income. Ideally, you will have enough money to cater to the expenses every month. Review your annual income and calculate the average monthly income.

Once you’re done, go back to your priorities and use them as a guideline to add expenses. Ensure you also identify essential and optional expenses to remain organized. The expenses should be reasonable, depending on how much money you earn. Include the savings goals at this point.

Build a “slush fund”

This is one of the most valuable tips for creating a budget with irregular income. You don’t want to spend all your monthly earnings. If you make more money than you need for your expenses, allocate the balance to your “slush fund.” The funds should be used to cover future expenses during low cash flow months.

The practice will enable you to avoid the effects of variable income. Consider keeping the money in a separate account to avoid spending it accidentally. If the income is lower during a particular month and you cannot afford to cater to essential expenses, you can use the funds to make up for the difference.

Plan for Last Month’s Earnings

Once you have created a budget and included unnecessary expenses, you will find out the amount of money you need throughout the month without using the savings. So deposit the money into your regular checking account the first of the following month.

From now on, make sure you deposit your income into whatever savings account suits your unique needs. The concept is also referred to as “zero-sum budget.” By considering last month’s earnings, it means you will be creating a budget based on realistic and not projected income.

Use the Lowest Income Estimate

If you realize you have inconsistent income, make sure you create a budget based on your lowest monthly estimate. This is because you can always go up from the amount. To identify the figure, go through your paychecks for the last 12 months and find the lowest.

What if it’s the first time you will get irregular income? In such scenarios, you just need to estimate the lowest earnings. The amount should be what you indicate as your monthly income in your budget.

Make Adjustments Over the Course of the Month

Once you have finished creating a budget for your lowest income, it’s time to take it for a test drive. You may realize that you will make more than your thought later during the month. Before you start using the extra earnings, ensure you include them in your budget.

For example, if you set the lowest monthly income as $10,000 but made $10,500, adjust the income. You just need to determine how to spend the extra money. Check the priorities you listed or include new ones.

Wrapping Up

Budgeting with inconsistent income can be challenging. Fortunately, you can still use the tips above to create a monthly budget. By following the tips, you will always have enough funds to cater to your unique needs every month.


In his spare time, Oscar loves tinkering with electronics. Solar panels, wiring, old TVs and sometimes DIY powerwalls. When he is not busy trying not to electrocute himself, you can find him in the garden tending to his vegetables and chickens.

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